Why IPO?

Per SEC rule, a company is obligated to go public once it exceeds 500-shareholder limit.
But other than for this reason, why do companies decide to go public and offer its shares?
What are the benefits of going public? of doing IPO?

1. ACCESS TO NEW CAPITAL - Primary benefit of IPO is that it is the cheapest way to raise large pools of capital. That is the main reason why firms go public. Companies get to the point in their life cycle where they need to raise large amounts of capital to grow and if you are a company that wants to raise upwards of 100 million dollars, the cheapest way to do that is go to the public markets. Why is public market the cheapest avenue to raise money? In the public market, a typical investor is well diversified. Thus, they only have to be compensated for bearing market risk, not for unique risk. Cost of capital, or return required by investor, is lowest when a firm is public as opposed to private because firm is selling to broad, diffuse group of potential owners.

2. ACCESS TO FUTURE CAPITAL - Beyond its initial public offering, the firm might be in a position in the future where it might need to do second or third offering of its stocks so that it can grow further. Statistics have shown that roughly 1/3 of US firms go back to equity markets within 5 years.

3. INSIDERS CASH OUT - There comes a point in the life-cycle of the company when Venture capitalists and other early investors, having invested for a long time or close to or beyond its investment horizon, are looking to cash out and IPO provides a mechanism through which they can cash out.

Some non-essential reasons why some firms go public:

4. GET ON THE "Radar Screen" OF POTENTIAL ACQUIRERS

5. IN ORDER TO USE STOCK AS CURRENCY FOR MAKING ACQUISITIONS

6. HIGHER PROFILE